We’ve been covering a lot of big 4 accounting firms news recently out of Australia. This is because Australia has had one of the most unique coronavirus responses, and the big 4 in Australia have had the most reaction to the pandemic.
In Australia, the big 4 accounting firms have fired people and cut their pay at the same time. Many employees at the big 4 have wondered why both measures were deployed.
The Sydney Morning Herald spoke to a few people at Deloitte and KPMG.
At Deloitte, staff were first told that they need to take a voluntary pay cut of 20%. Staff were hoping that they elected into this pay cut to keep their jobs. However, that did not happen. Deloitte later laid off 700 employees in Australia. Staff also had their life insurance pay outs reduced by 20% without their knowledge. This is pretty shady. This is obviously to increase partner profit. You reduce life insurance pay out which reduces the insurance premium that the firm pays. That’s terrible.
The 20% pay cuts only applied to people earning more than $65k. 25% pay cuts were taken by partners at the firm. The pay cuts will end on October 1.
One staff member at Deloitte had the following to say about the pay cuts:
The greater good was that everyone kept their job.After all the pay cuts were avoid job losses.
Another staff member at Deloitte had the following to say:
After the redundancies the headcount matched production of the firm and therefore everyone is busy with work – no reason therefore to continue pay cuts. The only reason to continue pay cuts is to protect partner profit. This has hit employees hard. The integrity of the firm is gone.
I mean this is one person’s opinion. How does a staff member know whether or not the firm’s headcount matches production. The overall take by the staff person is correct though. Deloitte implemented the pay cuts to preserve jobs. This is why I was telling you guys not to agree to the pay cuts when they first started. I knew the big 4 would do this. They always do this. They always implement cuts during downturns and never change back to the good times. They did it 2009 with the financial crisis. They cut expense allowances and never brought them back. They cut the bonus structure as well. If you are a partner and see that you don’t have to pay people the same as what you used to pay them, then why would you go back to the old method. Alternatively, if you can get away with firing a lot of people, then why not do it. They realize that most people are just greatful to have a job.Next let’s talk about KPMG in Australia.
KPMG let go of 200 of their employees amid a pay cut as well. Employees were given little notice when they were laid off similar to Deloitte. The article. The article goes on to cite KPMG’s good growth numbers which we saw in their revenue release. KPMG had 7% growth if you remember. I questioned that growth number because it is so high. That’s why I think KPMG still used pay cuts and lay offs. I’m not sure that 7% growth number adds up. The article goes on to cite contracts that KPMG won with the Australian government related to covid 19. I’m not sure that’s a reason for KPMG to keep employees at the firm. They don’t realize how many contracts KPMG likely lost in the year.
What are the key takeaways from these stories? Don’t take a voluntary pay cut. Think of the people that took the voluntary pay cut and still got fired. They probably regret taking the pay cut. The people that did take the pay cut are out there questioning the integrity of the firm. I can tell the person they interviewed was a staff person because the big 4 never had integrity to begin with. The big 4 are just like any other large corporation. They only support the executives at the top unless their are activist investors. Since the big 4 are run by their investors, they only support the partners. If you think the big 4 care about employees because of press releases they put out, then let me remove those goggles for you right now. Are the big 4 more evil than other corporations, no. This doesn’t mean that you should blindly follow what they tell you do or sit there and cry about. Just understand what you are getting into and move forward.